Aite Group's von Wezel: Open banking is facing a trust deficit

Though open banking is gaining advocates in the financial industry and regulatory bodies, a recent Aite Group study suggests many consumers may not be ready for it. The core problem, according to a recent Aite Group study, is an understanding gap. Many worry about the safety of their financial data, and the perception that third-party platforms can exercise control over their financial information, the study noted. [caption id="attachment_183492" align="alignright" width="436"] Source: Aite Group and Mobey Forum survey of 1,010 European consumers, June 2019[/caption] The Aite Group study, which was carried out in partnership with the Mobey Forum, surveyed 1,010 consumers in five countries, including Finland, France, Germany, Spain, and the United Kingdom. There were approximately 200 participants in each country for the study, which was released earlier this month. Ron van Wezel, senior analyst at Aite Group and author of the study, told Bank Innovation that banks that are leaders in digital innovation understand that open banking is a new way to generate business. Indeed, the growth of incumbents' banking-as-a-service businesses is evidence of the realization among many banks that open APIs can yield profitable returns. But access to data is not possible without customer consent. “Open banking needs time for consumers to get familiar with it and trust the process,” he explained. “I see already major banks starting to offer access to payment accounts at other banks, which means that a consumer with multiple accounts at [a] different bank can manage their finances through one portal.” The survey queried customers on a series of services dependent on open banking, including account aggregation, identity checks, purchase financing, product comparisons, and "pay by bank." Despite the convenience and ease of use of these services, supported by open banking, it is unclear if consumers will be ready to adopt them, argued von Wezel. What may be causing some customers to give pause is a trust deficit. According to the study, a majority of consumers prefer their main bank, instead of a third-party platform, as the provider of open-banking services. It found that consumers are hesitant to share their account data with other banks or third-party providers. Consumers were asked if they would be interested in a service that aggregates their account information. Of the respondents, only 32% claimed they were “very interested” or “extremely interested” in such a service. [caption id="attachment_183494" align="alignright" width="467"] Source: Aite Group and Mobey Forum survey of 1,010 European consumers, June 2019[/caption] A subset of respondents who did not seek additional information about an account aggregation service were asked why, to which 49% of respondents said they worried about the security of their personal information. Despite the enhanced consumer interest in personal finance and banking apps, only 6% of respondents said they would prefer an account aggregation service that’s not from their primary bank. This finding suggests trust in incumbents still motivates consumer choices. See also: How open banking is changing the way ING reaches its customers The reluctance among some consumers to embrace open-banking services extended to identity checks. Accordingly, 30 percent of consumers surveyed were either "not very interested" and "not at all interested" in using an identity check service that allows users to prove their identities online. Aite Group found that 56% of consumers surveyed worried about the security of their information when applied to identity-check services. Bob Meara, senior analyst at Celent, explained that when it comes to sharing banking data, old habits die hard for customers who fear a security breach, but he noted that some of those fears may ease over time as more consumers involve technology in their everyday lives. “It takes it takes two things. One is a compelling value proposition, and the second thing is it requires trust,” he said. “But it's still going to take a lot of dedicated marketing.” Despite trust challenges among some consumers, as regulators require institutions to embrace the concept, consumers may warm up to it, reported Aite Group. The study cited the the European Union's PSD2 deadline last September for institutions to open up account information via APIs to third parties. Companies and banks that come out on top in open banking will likely be trusted brands invest in customer experiences, wrote von Wezel. "Banks start from pole position but they will face strong competition from other providers of open banking services as the market matures," the study noted. "This requires a strategic response from banks to stay relevant." Bank Innovation Build, on Nov. 6-7 in Atlanta, helps attendees understand how to “do” innovation better. It is designed to offer best practices, to guide the innovation professional to better results. Register here .

Aite Group’s von Wezel: Open banking is facing a trust deficit

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